Fannie's Own Statement About Waiver /value Acceptance;

[J Grant]

Notice how some appraisers choose to dump on me for even asking, rather than look at the WAIVER system that is replacing appraisers? It can soon be copied by clients on the commercial end. Be careful what you wish for. They will see it and say, hey, if a WAIVER is good enough for a residential property worth 800k, then let's do it on a commercial property worth that kind of $.

This weird phenomenon of appraisers turning on their own is one of the key reasons appraisers can not stand together to protect their own profession. I do not see it present in any other field. I used to be a RE agent, and there was plenty of incompetence to go around, and not all of them liked each other, yet RE agents band together like a wolf pack to protect their own.

 

[George Hatch]

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What the bummer is.... is that these value acceptance sales are not indicated in public records as such. For the researching market value seekers...... it's data cancer infecting arm's length sales.

The meeting of the minds already occurred before the buyer applied for the loan. So the arms-length aspect remains untouched. If you want to say the waivers are enabling a higher (or lower) pricing tier to exist than what the appraisals have already been doing, that could possibly be the case.

But even if that is the case, if the buyers and sellers are still meeting at those prices in that pricing tier and those transactions are still arms-length basis. The financing terms are still fitting the cash or cash equivalency assumptions in the definition of MV. What is in dispute is the extent to which the buyers and sellers and brokers are operating on a well-informed basis.

 

[George Hatch]

You asked me this exact same question a day or two ago, and I answered that I do not believe these applications have a 100% approval rate. So why are you asking me again? I wrote this post assuming everybody was aware the WAIVER might not get a 100% approval rate. My post obviously addresses the cases where they did get approved for a waiver.

Did you honestly forget that you asked me this and I answered that I know 100% approval is not the case,, or was asking it again a way to make me look poorly informed?

I did not say they did not do due diligence. I said whatever diligence they used, they prohibit the lender from revealing it was done to the borrower, and it is not made open for scrutiny or review by others

Okay so you KNOW they're not just taking the borrower's word for it and your issue is that they're not disclosing how they are operating internally?

In terms of safe/sound decision making, if they haven't been doing the same with appraisals (comparing the 1004s against their own AVM) then they should be. They would arguably be remiss if they didn't. If they own the AVM then why wouldn't they use it in their review and underwriting processes? As often and as for many different uses as they can think of. Maximum utilization. Why own it and not use it?

Oh and BTW, using their own AVM as a secondary internal check of that 1004 but still deferring responsibility for their decision to the appraisal itself - without explicitly disclosing or submitting that step to outside review - that would set the precedent for doing the same in their waiver process. Right? Same reasoning.

Speaking of internal-use-only comparisons, checks and reviews, how many appraisal reports do you think these lenders and the GSEs review internally without anybody ever hearing about it? Not one word unless there's a serious problem with the appraisal and sometimes not even then. If the borrower isn't paying for those reviews or those AVM runs then that affects the disclosure requirements. Especially when the GSEs aren't even the party the borrower is doing the deal with.

 

[J Grant]

Okay so you KNOW they're not just taking the borrower's word for it and your issue is that they're not disclosing how they are operating internally?iI tol

I told you two days ago, when you asked me the SAME question, that I know the WAIVER offer is not 100% approved. So again, I am asking: why are you pretending that I might not know that and asking the exact same question again?

I read that 90% of properties are now eligible for waivers. That was not the case when the program started.

Yes, my issue is they do not disclose how they operate internally. WTF is funny about it? The fact that Fannie admits that even when a waiver was approved, the estimate might not be the actual value or the property means they are accepting and loaning on values that could be over or under the actual value. And instructing the lender not to tell the borrower any valuation was done by Fannie. If you are okay with that, then fine. Okay with secrecy and lack of disclosure. Got it.

 

[J Grant]

Okay so you KNOW they're not just taking the borrower's word for it and your issue is that they're not disclosing how they are operating internally?

You should already be aware that I KNOW that, since you asked me the exact same question recently. Did you forget that you asked it and I answered it?

Or are you trying to make it seem that I might not KNOW such a basic fact that not all waiver options are approved? Which is it?

 

[J Grant]

The meeting of the minds already occurred before the buyer applied for the loan. So the arms-length aspect remains untouched. If you want to say the waivers are enabling a higher (or lower) pricing tier to exist than what the appraisals have already been doing, that could possibly be the case.

But even if that is the case, if the buyers and sellers are still meeting at those prices in that pricing tier and those transactions are still arms-length basis. The financing terms are still fitting the cash or cash equivalency assumptions in the definition of MV. What is in dispute is the extent to which the buyers and sellers and brokers are operating on a well-informed basis.

Yeah, but they're not informed about it; taxpayers are footing the bill for the loans where a "meeting of the minds took place" that lack an MV opinion attached, backed by an appraisal.

The fact that borrowers might overpay for more deals with a waiver also affects RE markets. All it takes is a few sales like that a month to affect the data pool and be used as comps for other properties. You can't care about that. Fine. But why dump on others that do care?

Annie and Freddie have a mission of public trust. IDK how that aligns with them telling lenders not to disclose to borrowers that a valuation was done on their end.

A buyer is NOT well informed when the fact that a valuation was done by Fannie, such as an AVM, is withheld from the borrower. The borrower, in other words, has no idea of the "actual value/market value." They are placing blind trust in a system they might believe protects them when it does the opposite.

I was on a Reddit bulletin board where borrowers were talking about waivers, and RE agents were urging borrowers to take a waiver because a RE agent can do a CMA and assure a buyer the value was there. What a joke. RE agents' CMAs use cherry-picked superior comps that support the sale price.

 

[J Grant]

An appraisal does not just provide an MVO; it reveals repair or other adverse issues about a property. The financing clause with an apprasial in a contract protects the borrower. The borrower gives all that up to save a few $ and wait a few days for an appraisal. Of course, the lenders and RE agents smooth-sell it because it means their deals go through with no "speed bump" of an appraisal. That is actual Fannie verbiage; they refer to appraisals as a speed bump or friction.

Perhaps those defending a WAIVER-type program will soon lose their segment of work to a similar type of program. Would be fitting since they seem to think it is wonderful.

AI puts appraisers' comments out there. Your comments defending this amazing waiver program, using all kinds of due diligence by an unseen and unknown set of data analysts that can be bought cheap now - your defense of it can convince your own clients to drop your expensive, slow appraisals. Mission accomplished.

 

[George Hatch]

Problem identification comes first. So far we don't know if there is any value creep attributable to these programs. For all we know the waiver deals might be running cleaner than the appraisals. Or not. Either possibility could exist and the only party in any position to analyze and come to a conclusion are the GSEs themselves.

Do you think the GSEs have been operating without making those comparisons or coming to those conclusions? Because their demonstrated conduct on the matter isn't consistent with the "never considered it" implication. If they have the data in hand then why wouldn't they use it in that manner? Remember, the GSEs aren't the only competitor in that space. Their competition are also operating their own underwriting protocols independent of anything the GSEs are/aren't doing.

What I'm defending is rational and objective reasoning based on "to the best of our knowledge and belief". Based on what we can see and not necessarily including what we can't see. And Im defending the attribution of both the discretion to make the due diligence decisions and the responsibility for those decisions to those decision makers. If it's a problem then it's their problem and nobody else's.

 

[J Grant]

Problem identification comes first. So far we don't know if there is any value creep attributable to these programs. For all we know the waiver deals might be running cleaner than the appraisals. Or not. Either possibility could exist and the only party in any position to analyze and come to a conclusion are the GSEs themselves.

Exactly. The fact that they keep it in-house, where they are the only party, points to their lack of disclosure that a WAIVER was used. Thus it is not possible for outsiders to track, since this not shown on public record and MLS, and the fact that lenders are prohibited from even telling a borrower that Fannie did an AVM. If the program was so clean, why all the secrecy?

Do you think the GSEs have been operating without making those comparisons or coming to those conclusions? Because their demonstrated conduct on the matter isn't consistent with the "never considered it" implication. If they have the data in hand then why would they use it in that manner?

Why would they use it in that manner? To profit the lenders with fast closings and no MV issues or repair issues in an appraisal to stop a deal. It is not the GSE's personal funds, so why not? They demonstrated their tolerance for this kind of thing in the housing market crash, when they were fine with toxic loans of C and D paper bundled with A and B paper (non-disclosure, a pattern) and the outrageous mortgage lending terms they accepted. If youy defend it, fine but this kind of defense even from an appraiser whitewashsed their beais idk why - the defese is whveni This iis the similar pattern 2.0 but this time with values, since the loan tems side ahs far stritier regulatry limitis own.

 

[George Hatch]

First things first:

"does the value trend in the market support this loan decision" is an arguably separate consideration than "what's the MV of this property". Especially when the LTVs are other than 100%. Close enough to for a lender to do an 80% LTV doesn't necessarily require the same degree of precision as close enough for a buyer to pay this price in cash. Those are two separate benchmarks even when they're both operating off an appraisal of MV.
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And yes, clients and users sometimes make bad decisions or take on too much risk. Way of the world. Acknowledging that fact doesn't rise to a defense or advocacy of it. You need to take a step back before you accuse me of something I never did. Calm yourself.